ECB’s Stournaras: Central Banks Also Have Role to Play in Countering Impact of Climate Change
21 November 2023
By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Yannis Stournaras on Tuesday said that financial stability risks warranted the involvement of central banks in mitigating climate change.
In a speech at an Economist conference in Athens, the text of which was published on the website of the Bank of Greece, which he heads, Stournaras said that ‘both the transition to a low-emission economy and adaptation to climate change still need significant reinforcement.’
‘Investment is still insufficient and there are critical challenges that need to be addressed at institutional level in order to mobilise the huge amount of financial resources needed’, he said.
A common standard to evaluate businesses in terms of their ESG performance was needed, as was a more unified framework for the former to report this, he said. Money to fund projects to adapt to climate change was also lacking, he said.
‘In today's challenging environment, these challenges and weaknesses should prompt stronger and more decisive actions’, he said. ‘Our efforts need to be accelerated and coordinated, both at national, European and international level.’
For Europe and in particular the Eurozone to be better able to react to challenges like climate change, more fiscal integration, a full banking union and a real capital market union were required, he said.
‘But we should not wait for the political conditions in the euro area to mature before all this goes forward’, he said. ‘For example, the capital market union is already ready to be implemented immediately, as are the European Commission's proposals on bank crisis management and the European deposit insurance scheme.’
Central banks also had a role to play in dealing with climate change within the boundaries of their mandates, he said.
‘This is because climate-related risks are a source of instability and vulnerability for the financial system, as they can affect the transmission of monetary policy and create price stability shocks’, he said. ‘Thus, central banks take concrete measures to prevent risks to price stability and, together with supervisors, to ensure that the financial system is resilient to these risks.’